Fukushima’s TEPCO paid contractors over the odds

FLEECED:TEPCO has admitted to huge overpayments just as the government is set to double its financial support to help the firm accelerate its cleanup efforts

AFP, TOKYO

The operator of Japan’s crippled Fukushima Dai-ichi nuclear power plant has paid significantly over the odds on contractors, its spokesman said on Friday, vowing to boost cost-controls at the taxpayer-subsidized firm.

An internal probe looking at how contracts worth ￥1 trillion (US$10 billion) were awarded has found that the company routinely paid much more than the average rate because prices were inflated by layers of subcontractors.

The revelation comes as the Japanese government prepares to nearly double its financial support for the cash-stripped utility as part of its efforts to speed the removal of contamination in residential areas around the plant and process compensation for victims.

The in-house panel found Tokyo Electric Power Co (TEPCO) agreed to pay ￥21 million for construction linked to the nuclear power plant, but the work could have cost about half the price, the spokesman said.

In another instance, TEPCO was paying a contractor ￥49,000 a day for one worker, but would have paid only ￥12,000 if the company had employed the man directly.

“We’ve been making cost reduction efforts with the panel, and we will further cut costs, including in areas pointed out by the panel,” the spokesman said.

The overpaying is the result of farming out work to contractors, who themselves subcontract, sometimes hiring retired TEPCO officials, said the Asahi Shimbun, which first reported the case.

The revelation will be a further embarrassment to heads of the beleaguered firm, which has earned a reputation for inefficiency and ineptitude since the tsunami in March 2011 sent reactors at Fukushima Dai-ichi into a meltdown.

Japanese taxpayers were forced in 2012 to pay billions of US dollars to keep the giant utility afloat as it struggled with the enormous costs of decommissioning the reactors, cleaning up the mess and compensating people who had lost their homes to the disaster.

The government last month approved an additional US$1 billion to pay for facilities which would be used to store radioactive waste.

Under a restructuring plan submitted at the end of last year, TEPCO said it wants to cut costs by ￥3.365 trillion between fiscal years 2012 and 2021 by using measures that would include a greater use of competitive procurement bidding.

Critics say that Japan’s utilities, which have near-monopolies on both the production and distribution of power, have little financial savvy as they have never faced competition and are accustomed to being able to pass costs on to consumers.

Critics added that taxpayers repeatedly find themselves vulnerable because of fears that if TEPCO were to go under, it could deal a huge blow to some of its lenders, affecting other parts of the economy. The company’s failure could also affect electricity production in the economically vital Tokyo area.

TEPCO and Japan have yet to determine the exact cost of compensating tens of thousands of people who were forced to flee their homes and livelihoods to avoid radiation exposure.